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Businesses lay off workers after minimum wage increase

Jan 08,2018
Mr. Kim, 66, has been working as a security guard at Yonsei University’s amphitheater for 10 years. He clocks out at 6 p.m. every day, and other guards take his place in rotations.

But over the past month, his co-workers have been retiring, and rather than replacing them, the university has been installing unmanned security systems.

“I am still working to make ends meet for my family,” Kim said, “but I am scared about my job security.”

Out of 714 security guards and janitors at Yonsei University, 32 retired last month. The school hired five new people, while the jobs of the other 27 workers were replaced with a mix of part-timers who work three hours a day and automated systems. The remaining security guards and janitors are holding daily protests to fight the decision.

The situation at Yonsei University is indicative of the changes that the Korean labor market has undergone after the government decided to raise the minimum wage this year by a record 16 percent to 7,530 won ($7). It was the biggest jump in two decades, and the government said the policy was intended to boost spending by putting more money in people’s pockets.

Employers, however, have been responding by reducing work hours or installing automated machines to avoid spending more on labor. Universities have been especially quick to respond to the changes. Schools are reducing the number of irregular workers - those who have worked full time in various jobs on campus but with less job security than so-called regular workers - and replacing them with part-timers.

Ten universities in Seoul including Yonsei, Korea and Hongik universities, where janitors are members of the Korean Confederation of Trade Unions, raised the hourly wage for custodial staff from 6,950 won to 7,780 won this year.

After the increase, Korea University hired part-timers to fill 10 posts that used to be occupied by full-time janitors who retired last month. Hongik University fired four janitors and contracted the work to an outside agency.

Universities say they face continual fiscal hardship because of declining enrollment and a tuition freeze, and the minimum wage increase makes paying full-time workers even more difficult.

Workers are furious. Janitors at Hongik University held a rally on Friday to protest the school. “The Moon Jae-in administration finally increased the minimum wage,” one protester said, “but the university, despite its massive reserves, is using a dirty trick to challenge the wage hike.”

Janitors and students at Korea University also held a protest on Friday to criticize the school’s decision to replace full-time staff with part-timers.

There have also been massive layoffs at apartment complexes. The residential community board of a Hyundai apartment complex in Apgujeong-dong, southern Seoul, informed all 94 of its security guards on Dec. 28, 2017, that they would lose their jobs as of Dec. 31.

The board then posted a notice on Jan. 2 saying it decided to outsource the jobs of security guards, janitors and cleaners.

The board said the decision was unavoidable because of the wage increase and another government decision last year to ban security guards from performing additional duties like sorting through recycling and managing deliveries.

The board said it would rehire the fired security guards through an agency, but the guards feel uneasy about the scheme.

“I don’t know what will happen to my job, so I am just waiting for a decision,” one security guard said. The guards’ union said it would file a petition with the Ministry of Employment and Labor arguing that their layoff was illegal.

Owners of small business are running shop alone to save money. Moon Seok-hyeon, a 42-year-old convenience store owner in Sinchon, western Seoul, said he began personally running his store on weekends with the start of the new year.

Moon, who has owned the store for 12 years, said he used to hire part-timers on weekends to spend time with his family, but he couldn’t afford to do so anymore.

“After the minimum wage increase, operation costs went up, so I am working six hours on Fridays and Saturdays,” he said. “It’s unavoidable if I want to save expenses. Sales are the same, but monthly rent goes up and the minimum wage skyrocketed. I am very worried.”

A report from Hana Financial Investment estimates that the net profit of a convenience store owner will go down 14.2 percent on average when the minimum wage is factored in and sales, rent and management costs remain the same.

The 47-year-old owner of what was once a 24-hour hamburger joint in Gangdong District, eastern Seoul, decided to shorten her hours last month, closing the store from midnight to 7 a.m. Until now, Mrs. Park, the owner, had worked as a manager, while three part-timers ran the kitchen around the clock. From 10 p.m. until the next morning, two part-timers kept the store open.

But Park decided to reduce the store’s hours because the labor costs had suddenly become too high.

According to a survey conducted last month by Alba Cheonguk, a website for part-time job postings, 22.5 percent of employers said they would cut the number of part-timers by 10 to 20 percent this year.

“The minimum wage hike is actually worsening conditions for irregular workers as employers are replacing their full-time jobs with part-timers and even automated machines,” said Yang Hee-dong, a professor of management information systems at Ewha Womans University. “Resistance from employers will be stronger in industries that are sensitive to the minimum wage.”

BY HONG SANG-JI, HONG JI-YOO [ser.myoja@joongang.co.kr]